How does Budget record assets and liabilities assumed in a business combination?
Budget Franchise · 2025 FDDAnswer from 2025 FDD Document
We use the acquisition method of accounting for business combinations, which requires that the assets acquired and liabilities assumed be recorded at their respective fair values at the date of acquisition. Assets acquired and liabilities assumed in a business combination that arise from contingencies are recognized if fair value can be reasonably estimated at the acquisition date. The excess, if any, of (i) the Assets acquired and naturalized assumed in a pushess combination that arise from contingencies are recorded fair value of the consideration transferred by the acquirer and the fair value of any non-controlling interest remaining in the acquirer, over (ii) the fair values of the identifiable net assets acquired is recorded fair value of the consideration transferred by the acquirer and the fair value of any non-controlling interest remaining in the acquirer, over (ii) the fair values of the identifiable net assets acquired is recorded as goodwill. Gains and losses on the re-acquisition of license agreements are recorded in the Consolidated Statements of Operations within transaction-related costs, net, upon completion of the respective acquisition. Costs incurred to effect a business combination are expensed as incurred, except for the cost to issue debt related to the acquisition.
We record contingent consideration resulting from a business combination at its fair value on the acquisition date. The fair value of the contingent consideration is generally estimated by utilizing a Monte Carlo simulation technique, based on a range of possible future results (Level 3). Any changes in contingent consideration are recorded in transaction-related costs, net.
Transaction-related costs, net are classified separately in the Consolidated Statements of Operations. These costs are comprised of expenses primarily related to acquisition-related activities such as duediligence and other advisory costs, expenses related to the integration of the acquiree's operations with our own operations, including the implementation of best practices and process improvements, non-cash gains and losses related to re-acquired rights, expenses related to pre-acquired to non-cash gains and losses related to re-acquired rights, expenses related to pre-acquired rights.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 79)
What This Means (2025 FDD)
According to Budget's 2025 Franchise Disclosure Document, the company uses the acquisition method of accounting for business combinations. This means that when Budget acquires another business, it records the assets and liabilities assumed from that business at their fair values on the date Budget acquires the business. If these assets and liabilities arise from contingencies, they are recognized if their fair value can be reasonably estimated at the acquisition date.
The document further explains that any excess of the consideration transferred by Budget plus the fair value of any non-controlling interest over the fair values of the identifiable net assets acquired is recorded as goodwill. Gains and losses from re-acquiring license agreements are recorded within transaction-related costs in the Consolidated Statements of Operations upon completion of the acquisition. Costs incurred to complete the business combination are expensed as they are incurred, except for the cost to issue debt related to the acquisition.
Budget also records contingent consideration resulting from a business combination at its fair value on the acquisition date, typically estimated using a Monte Carlo simulation technique. Any changes in this contingent consideration are recorded in transaction-related costs. These transaction-related costs are classified separately in the Consolidated Statements of Operations and include expenses related to acquisition activities, integration of operations, and non-cash gains and losses related to re-acquired rights.